OW Industry to Average €15 Billion Per Year over the Next Ten Years

Douglas-Westwood forecast offshore wind installations averaging 3.2 GW per year over the next ten years with capital expenditure hitting a peak of 18bn in 2016. This report presents a new longer-term forecast and examines the key commercial developments since the last publication to provide detailed insight to established players and new entrant alike.

The increase in turbine capacity is considered to be one of the key factors for reducing the cost of energy, and European offshore wind developers will be specifying larger wind turbines with capacities of 5MW or greater. The size of the components for these future wind turbines will create unique challenges for installers, foundation designers and service providers.

As the industry seeks to reduce costs, a new generation of wind turbines designed around the unique requirements of the offshore environment are being rolled out with European project developers increasingly choosing to specify larger models with power outputs of 5 MW or more. The size of the components for these future wind turbines creates a unique set of challenges for installers, foundation designers and service providers.

A new manufacturing supply chain focused on the Northern European markets is slowly developing to meet demand with significant investments being made in aspects such as port infrastructure and foundation manufacturing capacity. At the same time, it will be crucial to leverage the experience and additional supply chain capacity from the offshore oil and gas sector.

The report highlights a series of challenges which are acting to constrain development, including the high cost levels in the industry. Capital outlays and recurring operational spending mean that subsidies are required to support development, at a time when the public finances in key markets such as the UK and Germany are squeezed and the consumer is seeing an upward trend in energy prices. This makes it increasingly difficult for governments to justify support, leading to a focus on identifying cost reduction strategies including standardisation of business practices and development of larger wind turbines designed specifically for the offshore environment.

From a financing perspective the risks associated with offshore construction, new wind turbine technology and offshore operations have made it difficult for project developers to tap into new sources of capital. The current dependence on global utilities to self-fund projects is unsustainable in the long-run, leading to a potential funding gap in the future. As larger players continue to enter the market, often from the offshore oil & gas sector, and new wind turbines reliability is proven over a sustained period of time, it is hoped that new investors will become more comfortable with the risk profile.

Press release, January 7, 2013